Ravsten Company uses a job-order costing system. The company applies overhead cost to jobs on the basis
Question:
Ravsten Company uses a job-order costing system.
The company applies overhead cost to jobs on the basis of machine –hours. For the current year, the company estimated that it would work 41,000 machine-hours and incur $41,000 machine-hours and incur $184,500 in manufacturing overhead cost. The following transactions concurred during the year:
a. Raw materials requisitioned for use in production, $195,000 (70% direct and 30% indirect)
b. The following costs were incurred for employee services:
Direct labor…………………………......…$165,000
Indirect labor……………………….….......$23,000
Sales commissions……………………....$15,000
Administrative salaries…………………$30,000
c. Heat, power, and water costs incurred in the factory, $47,000
d. Insurance costs, $15,000 (80% relates to factory operations, and 20% relates to selling and administrative activities).
e. Advertising costs incurred, $55,000.
f. Depreciation recorded for the year, $65,000 (75% relates to factory operations,
g. The company used 45,000 machine-hours during the year.
h. Goods that cost $485,000 to manufacture according to their job cost sheets were transferred to the finished goods warehouse.
i. Sales for the year totaled $710,000. The total cost to manufacture these goods according to their job cost sheets was $480,000.
Required:
1. Determine the under applied or over applied overhead for the year.
2. Prepare an income statement for the year.
Managerial Accounting
ISBN: 978-0697789938
13th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer